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1 of 1 people found the following review helpful
4.0 out of 5 stars Simple examples dealing with complex issues, 21 Jan. 2014
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This review is from: The Bankers' New Clothes: What's Wrong with Banking and What to Do about It (Hardcover)
If the now rarely-mentioned Paul Flowers of Co-op fame were to be given a book to read to catch up on his lack of banking skills, this would be somewhere near the top of the list of recommendations. With simple examples using the idea of someone buying a house with a mortgage the authors gradually take you through many of the complex issues that caused the 2007-8 financial crisis.
The only issue I have with the book is the repetition of the main argument: that in order to be more robust banks need to increase the amount of equity (capital) they hold. It's a very simple idea and, according to the authors, one which has no downside for anyone (banks, shareholders, borrowers or lenders), but I just kept asking myself if it's so good and so easy to put in place why haven't the regulators insisted on it. The authors do explain to some extent why it is advantageous to banks not to have so much equity (they get tax relief on debt, so they prefer to have more debt than equity), but even so...
I spite of this repetition, I would still thoroughly recommend to anyone vaguely interested in the financial markets and what can go wrong with them. It's enlightening and in short, clear sentences takes you through all the main issues to do with the role that banks played in the crisis.
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